Merchants who accept credit cards, debit cards, prepaid cards, and the like, as a form of payment typically receive a transaction settlement (payment of funds) within a short time period after the transaction. A normal transaction settlement is prompt, typically within 2 days of the transaction, with no predefined time period. The merchant pays a discount rate fee for participating in the credit transaction, which is reflected in the settlement. Accordingly, the amount of funds ultimately received by the merchant is less than the transaction charged to the consumer.
A portion of the discount rate fee is attributed to the risk of consumer default, as the issuer pays the merchant before the issuer is paid by the consumer. Thus, the issuer bears the majority of the risk of consumer default in the transaction and transfers a portion of the risk to the merchant, in the form of the discount rate fee. However, merchants have little to no control for setting or reducing the discount rate fee.